IMF warns CBN that eNaira may reduce deposits
The International Monetary Fund has warned the Central Bank of Nigeria that the e-Naira wallet may reduce demand for deposits in commercial banks.
Consequently, the Washington-based fund on Tuesday warned the CBN to manage the various risks associated with the digital currency especially the threats it poses to monetary policy implementation, cyber security, among others.
This was disclosed in its ‘Country Focus; Five Observations on Nigeria’s Central Bank Digital Currency.’
“For example, e-Naira wallets may be perceived, or even effectively function, as a deposit at the central bank, which may reduce demand for deposits in commercial banks. Relying as it does on digital technology, there is a need to manage cyber security and operational risks associated with the e-Naira.”
According to the IMF, the launch of the digital currency is drawing interest from the global world, and other central banks because of the size and complexity of Nigeria’s economy.
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The organisation added that the e-Naira uses the same blockchain technology as Bitcoin or Ethereum, but is not a financial asset like the two.
The IMF however noted that the e-Naira would increase financial inclusion, facilitate remission of remittances, and reduce informality.
According to the fund, Nigeria has a large informal economy with transactions and employment equivalent to over half of the GDP and 80 per cent of employment, respectively.
The IMF said, “The 2021 IMF Article IV mission emphasised the need for monitoring risks and macro-financial impacts associated with a central bank digital currency. The IMF is ready to collaborate with the authorities on data analysis, cross-country studies, sharing the e-Naira experience with other countries, and discussing further evolution of the e-Naira including its design, regulatory framework, and other aspects.”
Recall that four weeks ago, the President, Major General Muhammadu Buhari, and top officials of the central bank launched the e-Naira at the State House, Abuja.
